Money not set aside for retiree health

“Instead, we should use the voter-approved revenues from Prop. 30 as Californians were promised — to protect our classrooms and to pay down debt.”

Before 1985, state employees needed only to be on the payroll for five years and vested in the state retirement system to qualify for the full health care plan for life. That was later bumped up to 10 years. Then, those hired after Jan. 1, 1989, received half of their contribution by the state to the health plan after 10 years and the full contribution after 20 years.

“As health costs started to go up, it became more difficult for employees to be vested in the health retirement,” said Bruce Blanning, executive director of the Professional Engineers in California Government, which represents 13,000 state-employed engineers and related professionals.

“Over the years, the plan has been downgraded in its coverage: The co-payments are higher,” he added. “It’s not the same as it used to be. Employees over time have absorbed more of the costs.”

The state’s reluctance to tackle down-the-road expenses contrasts with steps taken at the local level to rein in analogous costs.

In San Diego, city leaders and labor unions two years ago brokered an agreement estimated to shave $330 million from a $1.1 billion shortage in money needed to pay lifetime health care for retired city workers. The cash flow savings to taxpayers is expected to exceed $714 million over 25 years, officials said.

Then-Mayor Jerry Sanders characterized the agreement as the “largest cost-saving measure ever implemented by the city” for taxpayers. The plan provided that for the first time city employees would contribute to their retiree health care costs, easing the financial risk for taxpayers.

“This settlement isn’t just a big step,” Sanders said at the time. “It’s a quantum leap.”

Debt for retiree health care had long been a fiscal albatross for the city following then-Mayor Pete Wilson’s promise of lifetime health benefits to all city workers in exchange for employees allowing the city to opt out of Social Security. But the city never put aside money for the long-term costs and a deficit grew over the next three-plus decades.

Frank De Clercq, head of the firefighters union, noted employees could have litigated the issue. But, he said, that would have ended up costing taxpayers via potential cuts to vital city services.

“It had been underfunded for so many years because the politicians chose to spend the money elsewhere for doing other pet projects,” he said.

Under the deal, veteran workers remained eligible for a benefit of $8,880 a year upon retirement, but have to pay $1,200 annually while employed to keep it. The deals are structured differently for newer hires.